Start a Motorbike Rental Service Supplying On-Demand Courier Drivers

This motorbike rental business supplies on demand or “last mile” courier drivers (Mr. D, Checkers 60, UberEats etc.) with delivery motorbikes on a rental basis usually a week at a time (lot of apps pay weekly).

While there has always been a motorbike rental industry (usually leisure) the on-demand apps has created a new category – and in South Africa a very large market – for cheaper on-demand delivery bike rental.

The economics
The economics are simple: if you have 100 motorbikes and you can rent it out for between around R100 day, maybe less say R500 per week. Then you have a R50 000 – R70 000 weekly revenue business, R200 000 – R280 000 monthly or R2.4 million to R3.36 million annually.

Business Model
You have to provide the bike. Petrol is the clients responsibility. You need to have an inhouse workshop as well as support vehicles (bakkie) that can collect and exchange bikes that have broken down. All that is your responsibility. The only thing the client worries about is petrol. Probably keep extra bikes on hand for spares. So try to get the same model not just for spares but to negotiate a better price from supplier.

Now in the past there simply was no market for a business to rent out 100 cheap Chinese bikes for last mile delivery but apps has open up this business. But why is the bike rental potential so big in SA?

The vast majority 99.9% (if not all) of drivers in this industry in South Africa come from neighboring countries basically with the clothes on their backs. They have no money to buy a motorbike to get started and won’t get loans from local banks either (not even South Africans will get loans from local banks without a regular source of income).

Now I want to interject here with a very important matter. I already had my suspicions that there was widespread corruption in this industry. Robert Mugabe’s compatriots are jumping through the hole in Patricia De Lille’s border fence with no licence and tomorrow they are driving for Checkers Sixty? That does not make sense.

Someone told me that a local company was “smokkeling” with (someone at) the traffic department. It would not surprise me if it were later to be found that most drivers licenses are in fact not legitimate. This is an important factor to be aware of as signing up drivers is core to the service and whoever can guarantee licences overnight will surely get the most drivers and come out tops.

It is just not possible to get a licence in the way they are getting licences, we know the bureaucracy of getting a licence: making an appointment for learners, taking theory learners test, making appointment for licence and taking and passing the practical yard test. All this is being bypassed. Now the whole country is a crime scene and corruption is widespread, some people even pay bribes for basic service delivery but even by SA standards the picture I was painted is so comical it beggars belief: Guy strolls over border in SA straight to bike delivery shop, he has no licence and has never rode a bike before. He is put on a motor bike, get’s his balance sorted and is taken to the traffic department to “sort out” his licence. If you are an honest person going up against such a scenario it poses a significant threat to your business. The question is can you compete in this industry if you are not corrupt? I think the only reason this business has scaled the way it has is because the large companies that the deliveries are happening for is looking the other way or washing their hands by saying the that the drivers are “independent contractors”. Nothing but shenanigans can explain the limitless supply of foreigners used to scale this business. That is why I’m not afraid of accusing this industry of corruption because they themselves know it is not possible that this whole business could scale with what borders on 100% foreigners like this. I have also heard that accidents and deaths are common in this industry. But it will take a while for all this to come out as it takes a while for the mainstream to get up to speed. But just be aware of that in your risk analysis, no way to prevail without dealing with foreigners and how many of them arrive here with licences?

This business is also a good candidate for a group investment but I’ll talk about that again as I need to provide context regarding my view of investment clubs that may work in SA.